Futures Weaker With US Tsys, BoJ To Raise FY Inflation Forecast

In post-Tokyo trade, JGB futures are weaker, closing -7 compared to settlement levels, after US tsys finished the NY session 2-8bp cheaper across benchmarks ahead of tomorrow’s FOMC meeting.

• A 25 bp hike is fully priced for Wednesday's meeting, but there is considerable uncertainty over the outlook. The risk that the Fed's stance is more hawkish than feared weighed on US tsys.
• The latest US PMIs showed continued services price pressure along with softer expected business activity.
• Supply also weighed on US tsys at the margin, even though the 2-year auction garnered decent demand. Sizeable flows weighed on tsys in the NY session, a block seller of 43k in TU was the highlight.
• Bloomberg reported (See link) that the BoJ is considering a sharp rise in its inflation forecast for the current financial year, to around 2.5% (from the projected 1.8% made in April). Beyond this, into the 2024 and 2025 financial years, the forecasts aren't expected to change too much, which is similar to what Reuters noted yesterday.
• The government already raised its inflation forecast for this financial year to 2.6% last Thursday.
• Note the data calendar is empty today, with the June PPI out tomorrow.
• Today the MoF plans to sell Y700mn of 40-year JGBs.